Daily Quiz: September 12

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Question 1 of 7

1. Question

1 points

Category: Economy

Which of the following statements about Banking Regulation (Amendment) Bill, 2017 is Correct:

It allows the RBI to initiate insolvency resolution process on specific stressed assets.

The provisions of the Actare not applicable to the Regional Rural Banks (RRBs).

Both A and B

Neither A nor B

Correct

The Act empowers the Central government to authorize the Reserve Bank of India (RBI) to direct banking companies to resolve specific stressed assets by initiating insolvency resolution process under the Insolvency and Bankruptcy Code, 2016. The RBI can specify authorities or committees to advise banks on resolution of stressed assets. The members on the committees will be appointed or approved by the RBI. The Act also make these provisions applicable to the SBI and its subsidiaries and also Regional Rural Banks (RRBs).

Incorrect

The Act empowers the Central government to authorize the Reserve Bank of India (RBI) to direct banking companies to resolve specific stressed assets by initiating insolvency resolution process under the Insolvency and Bankruptcy Code, 2016. The RBI can specify authorities or committees to advise banks on resolution of stressed assets. The members on the committees will be appointed or approved by the RBI. The Act also make these provisions applicable to the SBI and its subsidiaries and also Regional Rural Banks (RRBs).

Question 2 of 7

2. Question

1 points

Category: Economy

. Consider the following statements:

National Payments Corporation of India (NPCI) is the umbrella organisation for all retail payments system in India.

Bharat Bill Payment System (BBPS) is a Reserve Bank of India (RBI) conceptualised system driven by National Payments Corporation of India (NPCI).

Spice Money Ltd, a fintech company had received an in-principle approval to set-up as a BBPOU under the Payment and Settlement Systems Act, 2007 in May 2016.

Incorrect

Statement 3 is Incorrect:

Spice Money Ltd, a fintech company had received an in-principle approval to set-up as a BBPOU under the Payment and Settlement Systems Act, 2007 in May 2016.

Question 3 of 7

3. Question

1 points

Category: Economy

Consider the following statements about the Organization of the Petroleum Exporting Countries (OPEC):

OPEC is an international organization and economic cartel whose mission is to coordinate the policies of the oil-producing countries.

OPEC was formed by the Baghdad Conference in 1960.

It is headquartered in Vienna, Austria.

Select the correct answer using the codes given below:

1 and 2

2 and 3

1 and 3

1, 2 and 3

Correct

All statements are correct

The Organization of the Petroleum Exporting Countries (OPEC) was founded in Baghdad, Iraq, with the signing of an agreement in September 1960 by five countries namely Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. They were to become the Founder Members of the Organization.These countries were later joined by Qatar (1961), Indonesia (1962), Libya (1962), the United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Gabon (1975), Angola (2007) and Equatorial Guinea (2017).Ecuador suspended its membership in December 1992, but rejoined OPEC in October 2007. Indonesia suspended its membership in January 2009, reactivated it again in January 2016, but decided to suspend its membership once more at the 171st Meeting of the OPEC Conference on 30 November 2016. Gabon terminated its membership in January 1995. However, it rejoined the Organization in July 2016. This means that, currently, the Organization has a total of 14 Member Countries.

Incorrect

All statements are correct

The Organization of the Petroleum Exporting Countries (OPEC) was founded in Baghdad, Iraq, with the signing of an agreement in September 1960 by five countries namely Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. They were to become the Founder Members of the Organization.These countries were later joined by Qatar (1961), Indonesia (1962), Libya (1962), the United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Gabon (1975), Angola (2007) and Equatorial Guinea (2017).Ecuador suspended its membership in December 1992, but rejoined OPEC in October 2007. Indonesia suspended its membership in January 2009, reactivated it again in January 2016, but decided to suspend its membership once more at the 171st Meeting of the OPEC Conference on 30 November 2016. Gabon terminated its membership in January 1995. However, it rejoined the Organization in July 2016. This means that, currently, the Organization has a total of 14 Member Countries.

Question 4 of 7

4. Question

1 points

Category: Economy

Which of the followingeffects of inflation on different groups of society is correct?

Equity Holders or Investors: Persons who hold shares or stocks of companies gain during inflation.

Salaried Persons:Salaried workers such as clerks, teachers, and other white collar persons lose when there is inflation.

Select the correct answer using the codes given below:

1 and 2 only

2 and 3 only

1 and 3 only

All the above

Correct

Statement 1 is Incorrect:

During periods of rising prices, debtors gain and creditors lose. When prices rise, the value of money falls. Though debtors return the same amount of money, but they pay less in terms of goods and services. This is because the value of money is less than when they borrowed the money. Thus the burden of the debt is reduced and debtors gain.On the other hand, creditors lose. Although they get back the same amount of money which they lent, they receive less in real terms because the value of money falls. Thus inflation brings about a redistribution of real wealth in favour of debtors at the cost of creditors.

Statement 2 and 3 is correct:

Salaried workers such as clerks, teachers, and other white collar persons lose when there is inflation. The reason is that their salaries are slow to adjust when prices are rising.

Persons who hold shares or stocks of companies gain during inflation. For when prices are rising, business activities expand which increase profits of companies. As profits increase, dividends on equities also increase at a faster rate than prices.

But those who invest in debentures, securities, bonds, etc. which carry a fixed interest rate lose during inflation because they receive a fixed sum while the purchasing power is falling.

Incorrect

Statement 1 is Incorrect:

During periods of rising prices, debtors gain and creditors lose. When prices rise, the value of money falls. Though debtors return the same amount of money, but they pay less in terms of goods and services. This is because the value of money is less than when they borrowed the money. Thus the burden of the debt is reduced and debtors gain.On the other hand, creditors lose. Although they get back the same amount of money which they lent, they receive less in real terms because the value of money falls. Thus inflation brings about a redistribution of real wealth in favour of debtors at the cost of creditors.

Statement 2 and 3 is correct:

Salaried workers such as clerks, teachers, and other white collar persons lose when there is inflation. The reason is that their salaries are slow to adjust when prices are rising.

Persons who hold shares or stocks of companies gain during inflation. For when prices are rising, business activities expand which increase profits of companies. As profits increase, dividends on equities also increase at a faster rate than prices.

But those who invest in debentures, securities, bonds, etc. which carry a fixed interest rate lose during inflation because they receive a fixed sum while the purchasing power is falling.

Question 5 of 7

5. Question

1 points

Category: Economy

. Why do countries devalue their currencies?

To boost exports

To Shrink Trade Deficits

To Reduce Sovereign Debt Burdens

Select the correct answer using the codes given below:

1 and 2 only

1 and 3 only

1 only

All the above

Correct

All statements are correct:

Countries opt for devaluation only to save the economy from external factors and boost export.

As currency depreciates in the global parlance, exports become more favourable and imports unfavourable. This boosts the internal economy towards export and internal usage of own goods.

By devaluing the currency, trade deficits are lowered which also favours the balance of payments and thus helps the economy by providing temporary relief.

A government may be incentivized to encourage a weak currency policy if it has a lot of government issued sovereign debtto service on a regular basis. If debt payments are fixed, a weaker currency makes these payments effectively less expensive over time.

Incorrect

All statements are correct:

Countries opt for devaluation only to save the economy from external factors and boost export.

As currency depreciates in the global parlance, exports become more favourable and imports unfavourable. This boosts the internal economy towards export and internal usage of own goods.

By devaluing the currency, trade deficits are lowered which also favours the balance of payments and thus helps the economy by providing temporary relief.

A government may be incentivized to encourage a weak currency policy if it has a lot of government issued sovereign debtto service on a regular basis. If debt payments are fixed, a weaker currency makes these payments effectively less expensive over time.

Question 6 of 7

6. Question

1 points

Category: Economy

. Which the following statements about Regional Comprehensive Economic Partnership (RCEP)is correct:

7. Question

1 points

Category: Economy

The Reserve Bank of India recently opened the Sovereign Gold Bond Scheme or SGBs 2017-18 – Series II for subscription. With reference to the above statement which of the following statements aboutSovereign Gold Bonds (SGBs) is correct?

SGBs can be used as collateral for loans.

The tenor of the bond is for a minimum of 10 years with an option to exit in anytime.

Minimum investment in the bond shall be 1 grams and maximum is capped at 500 grams.

The Bonds are issued by the scheduled commercial banks on behalf of the government of India.

Select the correct answer using the codes given below:

1, 2 and 3 only

2, 3 and 4 only

1 and 3 only

All the above

Correct

Statement 2 and 4 are Incorrect:

The tenor of the bond is for a minimum of 8 years with option to exit in 5th, 6th and 7th years.

The Bonds are issued by the Reserve Bank of India on behalf of the government. The bonds are distributed through banks and designated post offices.

Statement 1 and 3 is Correct:

Bonds can be used as collateral for loans. Not only this, it would also be allowed to be traded on exchanges to allow early exits for investors.

SGBs will be issued on payment of rupees and denominated in grams of gold. Minimum investment in the bond shall be 1 gram. The bonds can be bought by Indian residents or entities and is capped at 500 grams

Incorrect

Statement 2 and 4 are Incorrect:

The tenor of the bond is for a minimum of 8 years with option to exit in 5th, 6th and 7th years.

The Bonds are issued by the Reserve Bank of India on behalf of the government. The bonds are distributed through banks and designated post offices.

Statement 1 and 3 is Correct:

Bonds can be used as collateral for loans. Not only this, it would also be allowed to be traded on exchanges to allow early exits for investors.

SGBs will be issued on payment of rupees and denominated in grams of gold. Minimum investment in the bond shall be 1 gram. The bonds can be bought by Indian residents or entities and is capped at 500 grams

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but if 1 million dollar is to be paid (assuming dollar to be the local currency), how will exchange rate of dollar and say rupee/pound would have any effect on 1 million dollar payment.

Kanchan Prakash

It reduces sovereign debt burden. Little tricky. As for example if an xyz country has a debt burden of 10 million dollars. Now if the xyz country devalued their currency to its half, the same amount will reduce to 5 lakhs only for that country… I hope this will make your doubt clear..

avtar

Suppose 1$=50 rupee exchange rate India has 50rupee debt to USA now India has devalued its currency to 1$=60….. Then it has to pay now 60. May b I m wrong!! But thanx

Kanchan Prakash

Suppose India has a debt of Rs 1000. As you say exchange rate is 1$=50. Divide 1000 by 50. It is 200 times India’s exchange rate. Now India devalued its currency and exchange rate becomes 1$=60. Now divide 1000/60. It is only 160 times its exchange rate. This is how devaluation helps reduce debt.it reduces the amount in respect to the current economy.